Singapore Air’s struggle

Monday, November 19, 2012

Growing losses at Singapore Airlines’ cargo division in the first half of the fiscal year contributed to lower operating profits and a 30 percent decline in net profit for the parent company.
Singapore Airlines Cargo’s operating loss reached S$99 million ($81.1 million), compared to S$31 million in 2011.
Singapore Airlines said Nov. 2 that it earned a net profit of S$168 million ($136.6 million), down S$71 million from the same six-month period in 2011, due mostly to last year’s non-operating gain from the disposal of aircraft and spare engines.
Singapore Airlines, which also owns regional carrier Silk Air and an aircraft maintenance subsidiary, reported operating profits increased 6 percent, or S$8 million, to S$142 million. The carrier showed a S$61 million operating profit increase in the first quarter because of favorable comparisons to the same quarter in 2011 when sales fell following the Japanese earthquake, but then suffered a S$53 million loss in the second quarter.
The weak air freight market played a significant role in the second quarter loss. In late October, Singapore Airlines Cargo said it will idle one of its 13 Boeing 747-400 freighters from January through May because of poor freight demand and high fuel prices. Under current plans the freighter will remain parked until May 2014. A storage location is in the process of being selected, the airline said.
“The air cargo market remains badly depressed and the near-term outlook continues to be challenging. Freight rates have declined to a level where certain flights are no longer viable. We have therefore taken this step to rationalize capacity further,” said SIA Cargo President Tan Kai Ping, in a statement.
Singapore Airlines’ group revenue grew 4 percent (S$294 million) to S$7.6 billion as passenger traffic increased 8 percent, partially offset by a decline in both passenger and cargo yields.
Despite reducing freighter capacity by 2.5 percent through a reduction in flying hours per plane, the cargo load factor declined 1.5 percent to 62.7 percent as cargo volume fell 4.7 percent as measured by ton-kilometers flown, the company said.